Both the present and the last Government hoped to see social enterprises flourish in the UK health sector. However, the results are many miles from their vision. With a few exceptions, the wholesale development of a viable social enterprise economy remains far away. So, what are the obstacles, and how can they be overcome?

Increasing awareness

It is clear that, whilst social enterprise is an option, it is one that is relatively new to many staff working within PCTs and that it is not well understood. This applies to both managers and clinical staff. Indeed, clinical staff may well have never considered the possibility of providing services through a social enterprise. Although entrepreneurial talent is not uncommon within the NHS, it has seldom been fostered -- and the bureaucracy of the NHS has undoubtedly worked against the emergence of entrepreneurial talent.

Getting the structure right

There are, a range of legal structures which any social enterprise can use, but in the case of social enterprises operating services that have hitherto been the preserve of the NHS, the choice is severely limited. That is because of the impact of the NHS Pension Regulations 1995 and the definition of an "Employing Authority". In broad terms, only general partnerships (which do not have limited liability protection) and companies limited by shares, where shares are held by individuals or bodies within the NHS family will qualify. It seems particularly strange that a limited liability partnership (LLP) cannot be used by medical practitioners when a general partnership can.

There have been some concerns that social enterprises providing health-related services to PCTs, might find themselves at a disadvantage, as compared to the PCT, since the social enterprise would have to charge VAT on services supplied to the PCT. This would increase costs. However, these concerns seem to be misconceived. On our understanding, all PCTs' current activities would be exempt from VAT if supplied by a social enterprise. There may be a small VAT risk in the case of the provision of welfare supplies made by a body that is not state-regulated, but we would expect any social enterprise providing welfare services to a PCT to have the appropriate regulated status.

Setting things straight

To make the most of the opportunities that are available for staff and PCTs in relation to social enterprise, the issues described above will need to be effectively addressed. This involves:

• Address pension issues outlined above.
• Encouraging investment through tax reforms and ensuring that state aid rules are dealt with appropriately and flexibly.
• Ensuring a model contract form is used at all times.
• Ensuring commissioning is effective and that procurement rules are applied appropriately and flexibly.
• Establishing a Social Enterprise Support Squad, which has people with appropriate skills to advise social entrepreneurs on how to transition out of the NHS.
• Financing the establishment of a social enterprise support services company.
• Establishing an insurance scheme for social enterprise in the health sector.

All these steps will require significant investment, but they represent a workable plan which can facilitate the success of social enterprises spinning out from the NHS.

Mo Girach will be speaking at our upcoming Guardian Seminar: Making the Leap: Social Enterprise and the NHS on 23rd February. Find out more, or sign up, here.